diff --git a/pkg/agent/context.go b/pkg/agent/context.go
index 3c2152580..592990607 100644
--- a/pkg/agent/context.go
+++ b/pkg/agent/context.go
@@ -9,6 +9,7 @@ import (
 	"strings"
 	"time"
 
+	"github.com/sipeed/picoclaw/pkg/config"
 	"github.com/sipeed/picoclaw/pkg/logger"
 	"github.com/sipeed/picoclaw/pkg/memory"
 	"github.com/sipeed/picoclaw/pkg/messages"
@@ -25,26 +26,30 @@ type ContextBuilder struct {
 	observationBlock string                // Pre-rendered observation block for prompt injection
 	knowledgeBlock   string                // Pre-rendered knowledge block from Focus completions
 	dagBlock         string                // Pre-rendered DAG compressed history
-}
-
-func getGlobalConfigDir() string {
-	home, err := os.UserHomeDir()
-	if err != nil {
-		return ""
-	}
-	return filepath.Join(home, ".picoclaw")
+	contextWindow    int                   // Max tokens for context window (0 = no limit)
 }
 
 func NewContextBuilder(workspace string) *ContextBuilder {
-	// builtin skills: skills directory in current project
-	// Use the skills/ directory under the current working directory
+	// Primary skills dir: XDG data dir (installed skills).
+	// Falls back to workspace/skills for legacy setups.
+	primarySkillsDir := filepath.Join(workspace, "skills")
+	if dir, err := config.SkillsDir(); err == nil {
+		primarySkillsDir = dir
+	}
+
+	// Global skills: ~/.config/picoclaw/skills (user-level overrides).
+	globalSkillsDir := ""
+	if dir, err := config.ConfigDir(); err == nil {
+		globalSkillsDir = filepath.Join(dir, "skills")
+	}
+
+	// Builtin skills: skills/ directory relative to the binary's working dir.
 	wd, _ := os.Getwd()
 	builtinSkillsDir := filepath.Join(wd, "skills")
-	globalSkillsDir := filepath.Join(getGlobalConfigDir(), "skills")
 
 	return &ContextBuilder{
 		workspace:    workspace,
-		skillsLoader: skills.NewSkillsLoader(workspace, globalSkillsDir, builtinSkillsDir),
+		skillsLoader: skills.NewSkillsLoader(primarySkillsDir, globalSkillsDir, builtinSkillsDir),
 	}
 }
 
@@ -81,6 +86,11 @@ func (cb *ContextBuilder) SetDAGBlock(block string) {
 	cb.dagBlock = block
 }
 
+// SetContextWindow configures the token budget for the system prompt.
+func (cb *ContextBuilder) SetContextWindow(tokens int) {
+	cb.contextWindow = tokens
+}
+
 func (cb *ContextBuilder) getIdentity() string {
 	now := time.Now().Format("2006-01-02 15:04 (Monday)")
 	workspacePath, _ := filepath.Abs(filepath.Join(cb.workspace))
@@ -139,86 +149,138 @@ func (cb *ContextBuilder) buildToolsSection() string {
 	return sb.String()
 }
 
+// roughTokenEstimate gives a conservative char-to-token ratio for budget checks.
+// ~4 chars per token for English text is a standard heuristic.
+// FIXME: This is a rough estimate and may not be accurate for all languages.
+// FIXME: Implement a proper token estimator.
+const charsPerToken = 4
+
 func (cb *ContextBuilder) BuildSystemPrompt() string {
-	parts := []string{}
-
-	// Core identity section
-	parts = append(parts, cb.getIdentity())
-
-	// Bootstrap files
-	bootstrapContent := cb.LoadBootstrapFiles()
-	if bootstrapContent != "" {
-		parts = append(parts, bootstrapContent)
+	type section struct {
+		name     string
+		content  string
+		priority int // lower = higher priority (kept first when trimming)
 	}
 
-	// Skills - show summary index and inline full definitions for direct use
-	skillsSummary := cb.skillsLoader.BuildSkillsSummary()
-	if skillsSummary != "" {
-		parts = append(parts, fmt.Sprintf(`# Skills
+	// Collect sections in priority order
+	sections := []section{}
 
-The following skills extend your capabilities. Full definitions are included below.
+	// P0: Core identity (always included)
+	sections = append(sections, section{"identity", cb.getIdentity(), 0})
 
-%s`, skillsSummary))
-	}
-	if skillsDefs := cb.loadSkills(); skillsDefs != "" {
-		parts = append(parts, skillsDefs)
+	// P1: Bootstrap files (user identity)
+	if bc := cb.LoadBootstrapFiles(); bc != "" {
+		sections = append(sections, section{"bootstrap", bc, 1})
 	}
 
-	// Observation block (stable prefix for prompt cache alignment)
-	if cb.observationBlock != "" {
-		parts = append(parts, "# Observations\n\n"+cb.observationBlock)
+	// P2: Skills index (lightweight Level 1 metadata)
+	if summary := cb.skillsLoader.BuildSkillsSummary(); summary != "" {
+		sections = append(sections, section{"skills", fmt.Sprintf(`# Skills
+
+The following skills extend your capabilities. To use a skill:
+1. Use **skill_search** to find relevant skills by keyword
+2. Use **skill_read** via tool_call to load the full skill content
+3. Use **skill_traverse** via tool_call to explore related skills
+
+Do NOT assume skill content — always load before applying.
+
+%s`, summary), 2})
 	}
 
-	if cb.knowledgeBlock != "" {
-		parts = append(parts, cb.knowledgeBlock)
-	}
-
-	if cb.dagBlock != "" {
-		parts = append(parts, "# Conversation History (Compressed)\n\n"+cb.dagBlock)
-	}
-
-	// 3-tier MemGPT working context injection
+	// P3: Working context (hot tier — highly dynamic, high value)
 	if cb.memoryStore != nil {
-		wcSection := cb.buildWorkingContextSection()
-		if wcSection != "" {
-			parts = append(parts, wcSection)
+		if wc := cb.buildWorkingContextSection(); wc != "" {
+			sections = append(sections, section{"working_context", wc, 3})
 		}
 	}
 
-	// Join with "---" separator
-	return strings.Join(parts, "\n\n---\n\n")
+	// P4: Observation block
+	if cb.observationBlock != "" {
+		sections = append(sections, section{"observations", "# Observations\n\n" + cb.observationBlock, 4})
+	}
+
+	// P5: Knowledge block
+	if cb.knowledgeBlock != "" {
+		sections = append(sections, section{"knowledge", cb.knowledgeBlock, 5})
+	}
+
+	// P6: DAG compressed history (lowest priority — can be reconstructed)
+	if cb.dagBlock != "" {
+		sections = append(sections, section{"dag", "# Conversation History (Compressed)\n\n" + cb.dagBlock, 6})
+	}
+
+	// Token budget enforcement: if we exceed ~40% of context window for the
+	// system prompt, trim lowest-priority sections first.
+	budgetChars := cb.tokenBudgetChars()
+	totalChars := 0
+	for _, s := range sections {
+		totalChars += len(s.content)
+	}
+
+	if budgetChars > 0 && totalChars > budgetChars {
+		logger.WarnCF("context", "System prompt exceeds token budget, trimming low-priority sections",
+			map[string]interface{}{
+				"total_chars":  totalChars,
+				"budget_chars": budgetChars,
+				"sections":     len(sections),
+			})
+		// Trim from lowest priority (highest number) first
+		for i := len(sections) - 1; i >= 0 && totalChars > budgetChars; i-- {
+			if sections[i].priority >= 5 { // only trim P5+ (knowledge, dag)
+				totalChars -= len(sections[i].content)
+				sections[i].content = ""
+			}
+		}
+	}
+
+	parts := make([]string, 0, len(sections))
+	for _, s := range sections {
+		if s.content != "" {
+			parts = append(parts, s.content)
+		}
+	}
+
+	prompt := strings.Join(parts, "\n\n---\n\n")
+
+	// Log token estimate for observability
+	tokenEst := len(prompt) / charsPerToken
+	logger.DebugCF("context", "System prompt token estimate",
+		map[string]interface{}{
+			"chars":      len(prompt),
+			"tokens_est": tokenEst,
+			"sections":   len(parts),
+		})
+
+	return prompt
+}
+
+// tokenBudgetChars returns the maximum character count for the system prompt,
+// derived from the context window size. Returns 0 if no limit is configured.
+func (cb *ContextBuilder) tokenBudgetChars() int {
+	if cb.contextWindow <= 0 {
+		return 0
+	}
+	// Reserve ~40% of context window for system prompt
+	return int(float64(cb.contextWindow) * 0.4 * charsPerToken)
 }
 
 func (cb *ContextBuilder) LoadBootstrapFiles() string {
-	if cb.delegate != nil {
-		ctx, cancel := context.WithTimeout(context.Background(), 2*time.Second)
-		defer cancel()
-
-		docs, err := cb.delegate.ListDocumentsByCategory(ctx, "picoclaw", "bootstrap")
-		if err == nil && len(docs) > 0 {
-			var result string
-			for _, doc := range docs {
-				result += fmt.Sprintf("## %s\n\n%s\n\n", doc.Name, doc.Content)
-			}
-			return result
-		}
+	if cb.delegate == nil {
+		return ""
 	}
 
-	bootstrapFiles := []string{
-		"AGENTS.md",
-		"SOUL.md",
-		"USER.md",
-		"IDENTITY.md",
+	ctx, cancel := context.WithTimeout(context.Background(), 2*time.Second)
+	defer cancel()
+
+	docs, err := cb.delegate.ListDocumentsByCategory(ctx, "picoclaw", "bootstrap")
+	if err != nil || len(docs) == 0 {
+		return ""
 	}
 
 	var result string
-	for _, filename := range bootstrapFiles {
-		filePath := filepath.Join(cb.workspace, filename)
-		if data, err := os.ReadFile(filePath); err == nil {
-			result += fmt.Sprintf("## %s\n\n%s\n\n", filename, string(data))
-		}
+	for _, doc := range docs {
+		result += fmt.Sprintf("## %s\n\n%s\n\n", doc.Name, doc.Content)
 	}
-
 	return result
 }
 
@@ -329,26 +391,7 @@ func (cb *ContextBuilder) AddAssistantMessage(msgs []messages.Message, content s
 	return msgs
 }
 
-func (cb *ContextBuilder) loadSkills() string {
-	allSkills := cb.skillsLoader.ListSkills()
-	if len(allSkills) == 0 {
-		return ""
-	}
-
-	var skillNames []string
-	for _, s := range allSkills {
-		skillNames = append(skillNames, s.Name)
-	}
-
-	content := cb.skillsLoader.LoadSkillsForContext(skillNames)
-	if content == "" {
-		return ""
-	}
-
-	return "# Skill Definitions\n\n" + content
-}
-
-// GetSkillsInfo returns information about loaded skills.
+// GetSkillsInfo returns information about available skills (metadata only).
 func (cb *ContextBuilder) GetSkillsInfo() map[string]interface{} {
 	allSkills := cb.skillsLoader.ListSkills()
 	skillNames := make([]string, 0, len(allSkills))
diff --git a/pkg/agent/integration_test.go b/pkg/agent/integration_test.go
index d9f88e592..37ffe2ec8 100644
--- a/pkg/agent/integration_test.go
+++ b/pkg/agent/integration_test.go
@@ -181,7 +181,7 @@ func TestIntegration_FullAgentLoop_SimpleResponse(t *testing.T) {
 
 	msgBus := bus.NewMessageBus()
 	model := newMockLanguageModel("Hello from Fantasy agent")
-	al := NewAgentLoop(cfg, msgBus, model)
+	al := mustNewAgentLoop(t, cfg, msgBus, model)
 
 	ctx, cancel := context.WithTimeout(context.Background(), 10*time.Second)
 	defer cancel()
@@ -244,7 +244,7 @@ func TestIntegration_FullAgentLoop_WithToolCalls(t *testing.T) {
 
 	msgBus := bus.NewMessageBus()
 	model := &toolCallingModel{}
-	al := NewAgentLoop(cfg, msgBus, model)
+	al := mustNewAgentLoop(t, cfg, msgBus, model)
 
 	// Register the echo tool
 	al.RegisterTool(&echoTool{})
@@ -298,7 +298,7 @@ func TestIntegration_ProcessDirect(t *testing.T) {
 
 	msgBus := bus.NewMessageBus()
 	model := newMockLanguageModel("Direct CLI response")
-	al := NewAgentLoop(cfg, msgBus, model)
+	al := mustNewAgentLoop(t, cfg, msgBus, model)
 
 	ctx, cancel := context.WithTimeout(context.Background(), 10*time.Second)
 	defer cancel()
@@ -393,7 +393,7 @@ func TestIntegration_Streaming_TextDeltas(t *testing.T) {
 
 	msgBus := bus.NewMessageBus()
 	model := newStreamingModel("Hello from streaming agent response")
-	al := NewAgentLoop(cfg, msgBus, model)
+	al := mustNewAgentLoop(t, cfg, msgBus, model)
 
 	ctx, cancel := context.WithTimeout(context.Background(), 10*time.Second)
 	defer cancel()
@@ -469,7 +469,7 @@ func TestIntegration_Streaming_WithToolCalls(t *testing.T) {
 
 	msgBus := bus.NewMessageBus()
 	model := &toolCallingModel{}
-	al := NewAgentLoop(cfg, msgBus, model)
+	al := mustNewAgentLoop(t, cfg, msgBus, model)
 	al.RegisterTool(&echoTool{})
 
 	ctx, cancel := context.WithTimeout(context.Background(), 10*time.Second)
@@ -531,7 +531,7 @@ func TestIntegration_MultipleMessages(t *testing.T) {
 
 	msgBus := bus.NewMessageBus()
 	model := newMockLanguageModel("Response")
-	al := NewAgentLoop(cfg, msgBus, model)
+	al := mustNewAgentLoop(t, cfg, msgBus, model)
 
 	sessionKey := "multi-msg-session"
 	ctx := context.Background()
diff --git a/pkg/agent/loop.go b/pkg/agent/loop.go
index 2a2633cd5..15294fb99 100644
--- a/pkg/agent/loop.go
+++ b/pkg/agent/loop.go
@@ -35,6 +35,7 @@ import (
 	"github.com/sipeed/picoclaw/pkg/security/securebus"
 	"github.com/sipeed/picoclaw/pkg/session"
 	"github.com/sipeed/picoclaw/pkg/state"
+	picosync "github.com/sipeed/picoclaw/pkg/sync"
 	"github.com/sipeed/picoclaw/pkg/tools"
 	"github.com/sipeed/picoclaw/pkg/utils"
 )
@@ -50,11 +51,12 @@ type AgentLoop struct {
 	state             *state.Manager
 	contextBuilder    *ContextBuilder
 	tools             *tools.ToolRegistry
-	memoryStore       *memstore.MemoryStore // 3-tier MemGPT memory (nil if init failed)
-	memDelegate       memory.MemoryDelegate // DB delegate (nil if memory disabled)
-	obsManager        *observation.Manager  // Observational memory (nil if memory disabled)
-	secureBus         *securebus.Bus        // ITR SecureBus (nil = disabled, direct execution)
-	activeSessionKey  atomic.Value          // Current session key for tool access
+	memoryStore       *memstore.MemoryStore  // 3-tier MemGPT memory (always initialized)
+	memDelegate       memory.MemoryDelegate  // DB delegate (always initialized)
+	obsManager        *observation.Manager   // Observational memory (always initialized)
+	secureBus         *securebus.Bus         // ITR SecureBus (nil = disabled, direct execution)
+	identitySync      *picosync.IdentitySync // File→DB sync for identity docs (nil if memory disabled)
+	activeSessionKey  atomic.Value           // Current session key for tool access
 	running           atomic.Bool
 	summarizing       sync.Map       // Tracks which sessions are currently being summarized
 	summarizeFailures sync.Map       // Tracks consecutive summarization failures per session (string -> int)
@@ -125,160 +127,151 @@ func createToolRegistry(workspace string, restrict bool, cfg *config.Config, msg
 	return registry
 }
 
-func NewAgentLoop(cfg *config.Config, msgBus *bus.MessageBus, model fantasy.LanguageModel) *AgentLoop {
-	workspace := cfg.WorkspacePath()
-	os.MkdirAll(workspace, 0755)
+func NewAgentLoop(ctx context.Context, cfg *config.Config, msgBus *bus.MessageBus, model fantasy.LanguageModel) (*AgentLoop, error) {
+	sandbox := cfg.SandboxPath()
+	os.MkdirAll(sandbox, 0755)
 
-	restrict := cfg.Agents.Defaults.RestrictToWorkspace
+	workspace := sandbox
+	restrict := cfg.RestrictToSandbox()
 
-	// Create tool registry for main agent
 	toolsRegistry := createToolRegistry(workspace, restrict, cfg, msgBus)
 
-	// Create subagent manager with its own tool registry
 	subagentManager := tools.NewSubagentManager(model, cfg.Agents.Defaults.Model, workspace, msgBus)
 	subagentTools := createToolRegistry(workspace, restrict, cfg, msgBus)
-	// Subagent doesn't need spawn/subagent tools to avoid recursion
 	subagentManager.SetTools(subagentTools)
 
-	// Register spawn tool (for main agent)
 	spawnTool := tools.NewSpawnTool(subagentManager)
 	toolsRegistry.Register(spawnTool)
 
-	// Register subagent tool (synchronous execution)
 	subagentTool := tools.NewSubagentTool(subagentManager)
 	toolsRegistry.Register(subagentTool)
 
-	// Create context builder and set tools registry
 	contextBuilder := NewContextBuilder(workspace)
 	contextBuilder.SetToolsRegistry(toolsRegistry)
+	contextBuilder.SetContextWindow(cfg.Agents.Defaults.MaxTokens)
 
-	// Progressive skill disclosure tools (skill_search → skill_read → skill_traverse)
 	sl := contextBuilder.SkillsLoader()
 	toolsRegistry.Register(tools.NewSkillSearchTool(sl))
 	toolsRegistry.Register(tools.NewSkillReadTool(sl))
 	toolsRegistry.Register(tools.NewSkillTraverseTool(sl))
 
-	// Initialize 3-tier MemGPT memory system
-	var ms *memstore.MemoryStore
-	var memDelegate memory.MemoryDelegate
-	if cfg.Memory.Enabled {
-		memDBPath := filepath.Join(workspace, "memory", "picoclaw.db")
-		os.MkdirAll(filepath.Dir(memDBPath), 0755)
+	// Initialize 3-tier MemGPT memory system (always enabled, fail-fast on error)
+	memDBPath := cfg.DBPath()
+	os.MkdirAll(filepath.Dir(memDBPath), 0755)
 
-		del, err := delegate.NewFromConfig(cfg.Memory, memDBPath)
-		if err != nil {
-			logger.WarnCF("agent", "Failed to create memory delegate, memory system disabled",
-				map[string]interface{}{"error": err.Error()})
-		} else {
-			if err := del.Init(context.Background()); err != nil {
-				logger.WarnCF("agent", "Failed to init memory schema, memory system disabled",
-					map[string]interface{}{"error": err.Error()})
-				del.Close()
-			} else {
-				memDelegate = del
-				offloadThreshold := cfg.Memory.OffloadThresholdTokens
-				if offloadThreshold <= 0 {
-					offloadThreshold = 4000
-				}
-				chunker := memstore.NewMarkdownChunker(memstore.DefaultMarkdownChunkerConfig())
+	del, err := delegate.NewFromConfig(cfg.Memory, memDBPath)
+	if err != nil {
+		return nil, fmt.Errorf("memory delegate init: %w", err)
+	}
+	if err := del.Init(ctx); err != nil {
+		del.Close()
+		return nil, fmt.Errorf("memory schema init: %w", err)
+	}
+	memDelegate := del
 
-				embedder, embErr := memstore.NewEmbedderFromConfig(cfg.Memory.Embedding, cfg.Providers)
-				if embErr != nil {
-					logger.WarnCF("agent", "Failed to create embedding provider, archival search will use FTS5 only",
-						map[string]interface{}{"error": embErr.Error()})
-				}
+	offloadThreshold := cfg.Memory.OffloadThresholdTokens
+	if offloadThreshold <= 0 {
+		offloadThreshold = 4000
+	}
+	chunker := memstore.NewMarkdownChunker(memstore.DefaultMarkdownChunkerConfig())
 
-				ms = memstore.New(del, chunker, embedder, memstore.Config{
-					ContextWindowTokens:    cfg.Agents.Defaults.MaxTokens,
-					OffloadThresholdTokens: offloadThreshold,
-				})
-				contextBuilder.SetMemoryStore(ms)
+	embedder, embErr := memstore.NewEmbedderFromConfig(cfg.Memory.Embedding, cfg.Providers)
+	if embErr != nil {
+		logger.WarnCF("agent", "Failed to create embedding provider, archival search will use FTS5 only",
+			map[string]interface{}{"error": embErr.Error()})
+	}
 
-				memTool := NewMemGPTTool(ms, "picoclaw", "default")
-				toolsRegistry.Register(memTool)
+	ms := memstore.New(del, chunker, embedder, memstore.Config{
+		ContextWindowTokens:    cfg.Agents.Defaults.MaxTokens,
+		OffloadThresholdTokens: offloadThreshold,
+	})
+	contextBuilder.SetMemoryStore(ms)
 
-				// Agentic retrieval tools (keyword_search → semantic_search → chunk_read)
-				toolsRegistry.Register(tools.NewKeywordSearchTool(ms, "picoclaw"))
-				toolsRegistry.Register(tools.NewSemanticSearchTool(ms, "picoclaw"))
-				toolsRegistry.Register(tools.NewChunkReadTool(ms, "picoclaw"))
+	memTool := NewMemGPTTool(ms, "picoclaw", "default")
+	toolsRegistry.Register(memTool)
 
-				contextBuilder.SetDelegate(del)
+	toolsRegistry.Register(tools.NewKeywordSearchTool(ms, "picoclaw"))
+	toolsRegistry.Register(tools.NewSemanticSearchTool(ms, "picoclaw"))
+	toolsRegistry.Register(tools.NewChunkReadTool(ms, "picoclaw"))
 
-				// One-time migrations
-				mctx := context.Background()
-				if migErr := memory.MigrateState(mctx, workspace, del, "picoclaw"); migErr != nil {
-					logger.WarnCF("agent", "State KV migration failed (non-fatal)",
-						map[string]interface{}{"error": migErr.Error()})
-				}
-				if migErr := memory.MigrateDocuments(mctx, workspace, del, "picoclaw"); migErr != nil {
-					logger.WarnCF("agent", "Document migration failed (non-fatal)",
-						map[string]interface{}{"error": migErr.Error()})
-				}
-				if migErr := memory.MigrateLongTermMemory(mctx, workspace, del, "picoclaw"); migErr != nil {
-					logger.WarnCF("agent", "Long-term memory migration failed (non-fatal)",
-						map[string]interface{}{"error": migErr.Error()})
-				}
-				if migErr := memory.MigrateDailyNotes(mctx, workspace, del, "picoclaw"); migErr != nil {
-					logger.WarnCF("agent", "Daily notes migration failed (non-fatal)",
-						map[string]interface{}{"error": migErr.Error()})
-				}
-			}
-		}
+	contextBuilder.SetDelegate(del)
+
+	if migErr := memory.MigrateState(ctx, workspace, del, "picoclaw"); migErr != nil {
+		logger.WarnCF("agent", "State KV migration failed (non-fatal)",
+			map[string]interface{}{"error": migErr.Error()})
+	}
+	if migErr := memory.MigrateDocuments(ctx, workspace, del, "picoclaw"); migErr != nil {
+		logger.WarnCF("agent", "Document migration failed (non-fatal)",
+			map[string]interface{}{"error": migErr.Error()})
+	}
+	if migErr := memory.MigrateLongTermMemory(ctx, workspace, del, "picoclaw"); migErr != nil {
+		logger.WarnCF("agent", "Long-term memory migration failed (non-fatal)",
+			map[string]interface{}{"error": migErr.Error()})
+	}
+	if migErr := memory.MigrateDailyNotes(ctx, workspace, del, "picoclaw"); migErr != nil {
+		logger.WarnCF("agent", "Daily notes migration failed (non-fatal)",
+			map[string]interface{}{"error": migErr.Error()})
+	}
+
+	subagentManager.SetRunLoop(MakeRunLoopFunc(ms))
+
+	// Identity file sync (disk → DB)
+	var idSync *picosync.IdentitySync
+	identityDir, idErr := config.IdentityDir()
+	if idErr != nil {
+		logger.WarnCF("agent", "Could not resolve identity dir, identity sync disabled",
+			map[string]interface{}{"error": idErr.Error()})
 	} else {
-		logger.InfoCF("agent", "Memory system disabled by config", nil)
-	}
-
-	// Create state manager -- use delegate-backed KV when memory system is active
-	var stateOpts []state.Option
-	if memDelegate != nil {
-		stateOpts = append(stateOpts, state.WithDelegate(memDelegate))
-	}
-	stateManager := state.NewManager(workspace, stateOpts...)
-
-	// Create session manager -- use delegate for DB persistence when available
-	sessionsDir := filepath.Join(workspace, "sessions")
-	var sessionOpts []session.SessionOption
-	if memDelegate != nil {
-		sessionOpts = append(sessionOpts, session.WithSessionDelegate(memDelegate, "picoclaw"))
-	}
-	sessionsManager := session.NewSessionManager(sessionsDir, sessionOpts...)
-
-	// Register meta-tools for progressive disclosure (tool_search + tool_call)
-	toolsRegistry.RegisterMetaTools()
-
-	// If memory tool is a gateway, mark it visible in progressive mode
-	if ms != nil {
-		toolsRegistry.MarkGateway("memory")
-	}
-
-	// Apply progressive disclosure config
-	if cfg.Tools.ProgressiveDisclosure {
-		toolsRegistry.SetProgressiveDisclosure(true)
-		logger.InfoCF("agent", "Progressive tool disclosure enabled",
-			map[string]interface{}{"gateway_tools": toolsRegistry.ListVisible()})
-	}
-
-	// Initialize observation manager if memory is enabled
-	var obsManager *observation.Manager
-	if memDelegate != nil {
-		callModelFn := func(ctx context.Context, prompt string) (string, error) {
-			temp := 0.3
-			maxTokens := int64(1024)
-			resp, err := model.Generate(ctx, fantasy.Call{
-				Prompt: fantasy.Prompt{
-					fantasy.NewUserMessage(prompt),
-				},
-				Temperature:     &temp,
-				MaxOutputTokens: &maxTokens,
-			})
-			if err != nil {
-				return "", err
-			}
-			return resp.Content.Text(), nil
+		idSync = picosync.New(identityDir, "picoclaw", memDelegate)
+		if syncErr := idSync.SyncAll(ctx); syncErr != nil {
+			logger.WarnCF("agent", "Initial identity sync failed (non-fatal)",
+				map[string]interface{}{"error": syncErr.Error()})
+		} else {
+			logger.InfoCF("agent", "Identity files synced to DB", nil)
+		}
+		if watchErr := idSync.Watch(ctx); watchErr != nil {
+			logger.WarnCF("agent", "Identity file watcher failed to start, using mtime fallback",
+				map[string]interface{}{"error": watchErr.Error()})
 		}
-		obsManager = observation.NewManager(memDelegate, "picoclaw", callModelFn, observation.DefaultManagerConfig())
 	}
 
+	// State manager (always delegate-backed)
+	stateManager := state.NewManager(workspace, state.WithDelegate(memDelegate))
+
+	// Session manager (always delegate-backed)
+	sessionsDir := filepath.Join(workspace, "sessions")
+	sessionsManager := session.NewSessionManager(sessionsDir, session.WithSessionDelegate(memDelegate, "picoclaw"))
+
+	// Meta-tools for progressive disclosure (tool_search + tool_call)
+	toolsRegistry.RegisterMetaTools()
+	toolsRegistry.MarkGateway("memory")
+	toolsRegistry.MarkGateway("skill_search")
+
+	// Wire skills loader into tool_search for unified discovery
+	if ts, ok := toolsRegistry.Get("tool_search"); ok {
+		if tst, ok := ts.(*tools.ToolSearchTool); ok {
+			tst.SetSkillsLoader(contextBuilder.SkillsLoader())
+		}
+	}
+
+	// Observation manager
+	callModelFn := func(ctx context.Context, prompt string) (string, error) {
+		temp := 0.3
+		maxTokens := int64(1024)
+		resp, err := model.Generate(ctx, fantasy.Call{
+			Prompt: fantasy.Prompt{
+				fantasy.NewUserMessage(prompt),
+			},
+			Temperature:     &temp,
+			MaxOutputTokens: &maxTokens,
+		})
+		if err != nil {
+			return "", err
+		}
+		return resp.Content.Text(), nil
+	}
+	obsManager := observation.NewManager(memDelegate, "picoclaw", callModelFn, observation.DefaultManagerConfig())
+
 	al := &AgentLoop{
 		bus:            msgBus,
 		languageModel:  model,
@@ -293,24 +286,22 @@ func NewAgentLoop(cfg *config.Config, msgBus *bus.MessageBus, model fantasy.Lang
 		memoryStore:    ms,
 		memDelegate:    memDelegate,
 		obsManager:     obsManager,
+		identitySync:   idSync,
 		summarizing:    sync.Map{},
 		cfg:            cfg,
 	}
 
-	// Register focus tools (start_focus / complete_focus) when memory is available.
-	// The sessionKeyFn closure reads the activeSessionKey set at the start of each agent turn.
-	if memDelegate != nil {
-		sessionKeyFn := func() string {
-			if v := al.activeSessionKey.Load(); v != nil {
-				return v.(string)
-			}
-			return ""
+	// Focus tools (start_focus / complete_focus)
+	sessionKeyFn := func() string {
+		if v := al.activeSessionKey.Load(); v != nil {
+			return v.(string)
 		}
-		toolsRegistry.Register(tools.NewStartFocusTool(memDelegate, sessionsManager, sessionKeyFn))
-		toolsRegistry.Register(tools.NewCompleteFocusTool(memDelegate, sessionsManager, sessionKeyFn))
+		return ""
 	}
+	toolsRegistry.Register(tools.NewStartFocusTool(memDelegate, sessionsManager, sessionKeyFn))
+	toolsRegistry.Register(tools.NewCompleteFocusTool(memDelegate, sessionsManager, sessionKeyFn))
 
-	return al
+	return al, nil
 }
 
 func (al *AgentLoop) Run(ctx context.Context) error {
@@ -357,6 +348,9 @@ func (al *AgentLoop) Run(ctx context.Context) error {
 
 func (al *AgentLoop) Stop() {
 	al.running.Store(false)
+	if al.identitySync != nil {
+		al.identitySync.Close()
+	}
 	if al.memoryStore != nil {
 		if err := al.memoryStore.Sync(); err != nil {
 			logger.WarnCF("agent", "Failed to sync memory before shutdown",
@@ -405,14 +399,14 @@ func (al *AgentLoop) SetupSecureBus(ss *security.SecretStore, cfg securebus.BusC
 
 // RecordLastChannel records the last active channel for this workspace.
 // This uses the atomic state save mechanism to prevent data loss on crash.
-func (al *AgentLoop) RecordLastChannel(channel string) error {
-	return al.state.SetLastChannel(channel)
+func (al *AgentLoop) RecordLastChannel(ctx context.Context, channel string) error {
+	return al.state.SetLastChannel(ctx, channel)
 }
 
 // RecordLastChatID records the last active chat ID for this workspace.
 // This uses the atomic state save mechanism to prevent data loss on crash.
-func (al *AgentLoop) RecordLastChatID(chatID string) error {
-	return al.state.SetLastChatID(chatID)
+func (al *AgentLoop) RecordLastChatID(ctx context.Context, chatID string) error {
+	return al.state.SetLastChatID(ctx, chatID)
 }
 
 func (al *AgentLoop) ProcessDirect(ctx context.Context, content, sessionKey string) (string, error) {
@@ -560,27 +554,30 @@ func (al *AgentLoop) processSystemMessage(_ context.Context, msg bus.InboundMess
 	return "", nil
 }
 
-// runAgentLoop is the core message processing logic.
-// It handles context building, Fantasy agent creation, tool execution, and response handling.
-// When opts.Streaming is true, delegates to runAgentLoopStreaming for real-time token delivery.
-func (al *AgentLoop) runAgentLoop(ctx context.Context, opts processOptions) (string, error) {
-	al.activeSessionKey.Store(opts.SessionKey)
+// assembledContext holds the pre-processed context produced by assembleContext,
+// consumed by both the Generate and Stream code paths.
+type assembledContext struct {
+	systemPrompt   string
+	userPrompt     string
+	fantasyHistory []fantasy.Message
+	adaptedTools   []fantasy.AgentTool
+	agent          fantasy.Agent
+}
 
-	if opts.Streaming {
-		return al.runAgentLoopStreaming(ctx, opts)
-	}
-	// 0. Record last channel for heartbeat notifications (skip internal channels)
+// assembleContext performs the shared pre-processing for every agent turn:
+// record channel, update tool contexts, load memory blocks, build messages,
+// DAG-compress history, split into system/history/user, adapt tools, create Fantasy agent.
+func (al *AgentLoop) assembleContext(ctx context.Context, opts processOptions) assembledContext {
 	if opts.Channel != "" && opts.ChatID != "" {
 		if !constants.IsInternalChannel(opts.Channel) {
 			channelKey := fmt.Sprintf("%s:%s", opts.Channel, opts.ChatID)
-			if err := al.RecordLastChannel(channelKey); err != nil {
+			if err := al.RecordLastChannel(ctx, channelKey); err != nil {
 				logger.WarnCF("agent", "Failed to record last channel: %v", map[string]interface{}{"error": err.Error()})
 			}
 		}
 	}
 
-	// 1. Update tool contexts
-	logger.DebugCF("agent", "runAgentLoop: starting",
+	logger.DebugCF("agent", "assembleContext: starting",
 		map[string]interface{}{
 			"session_key": opts.SessionKey,
 			"channel":     opts.Channel,
@@ -588,19 +585,12 @@ func (al *AgentLoop) runAgentLoop(ctx context.Context, opts processOptions) (str
 		})
 	al.updateToolContexts(opts.Channel, opts.ChatID)
 
-	// 2. Load observation block for system prompt injection
-	if al.obsManager != nil {
-		block := al.obsManager.LoadBlock(ctx, opts.SessionKey)
-		al.contextBuilder.SetObservationBlock(block)
-	}
+	block := al.obsManager.LoadBlock(ctx, opts.SessionKey)
+	al.contextBuilder.SetObservationBlock(block)
 
-	// 2b. Load knowledge block from completed Focus sessions
-	if al.memDelegate != nil {
-		kb := tools.LoadKnowledgeBlock(ctx, al.memDelegate, opts.SessionKey)
-		al.contextBuilder.SetKnowledgeBlock(kb)
-	}
+	kb := tools.LoadKnowledgeBlock(ctx, al.memDelegate, opts.SessionKey)
+	al.contextBuilder.SetKnowledgeBlock(kb)
 
-	// 3. Build messages with DAG compression (skip history for heartbeat)
 	var history []messages.Message
 	var summary string
 	if !opts.NoHistory {
@@ -608,43 +598,32 @@ func (al *AgentLoop) runAgentLoop(ctx context.Context, opts processOptions) (str
 		summary = al.sessions.GetSummary(opts.SessionKey)
 	}
 
-	// 3a. DAG compression: compress old history, keep raw tail
 	history = al.applyDAGCompression(history)
 
-	builtMsgs := al.contextBuilder.BuildMessages(
-		history,
-		summary,
-		opts.UserMessage,
-		nil,
-		opts.Channel,
-		opts.ChatID,
-	)
+	if al.identitySync != nil {
+		_ = al.identitySync.CheckAndSync(ctx)
+	}
 
-	// 3b. Save user message to session
+	builtMsgs := al.contextBuilder.BuildMessages(history, summary, opts.UserMessage, nil, opts.Channel, opts.ChatID)
 	al.sessions.AddMessage(opts.SessionKey, "user", opts.UserMessage)
 
-	// 4. Split built messages into system prompt, conversation history, and current user prompt.
-	// BuildMessages returns: [system, ...history, user]
 	systemPrompt := ""
 	var historyMsgs []messages.Message
 	userPrompt := opts.UserMessage
 
 	if len(builtMsgs) > 0 && builtMsgs[0].Role == "system" {
 		systemPrompt = builtMsgs[0].Content
-		// History is everything between system and last user message.
 		if len(builtMsgs) > 2 {
 			historyMsgs = builtMsgs[1 : len(builtMsgs)-1]
 		}
 	}
 
-	// 5. Convert history to Fantasy message format
-	logger.DebugCF("agent", "runAgentLoop: history messages",
+	logger.DebugCF("agent", "assembleContext: history messages",
 		map[string]interface{}{
 			"history": formatMessagesForLog(historyMsgs),
 		})
 	fantasyHistory := picofantasy.MessagesToFantasy(historyMsgs)
 
-	// 6. Build adapted tools from PicoClaw registry (with optional offloading)
 	adaptCfg := picofantasy.AdaptedToolsConfig{
 		MemStore:   al.memoryStore,
 		AgentID:    "picoclaw",
@@ -652,7 +631,6 @@ func (al *AgentLoop) runAgentLoop(ctx context.Context, opts processOptions) (str
 	}
 	adaptedTools := picofantasy.BuildAdaptedTools(al.tools, al.bus, opts.Channel, opts.ChatID, adaptCfg)
 
-	// 7. Create Fantasy agent with tools and configuration
 	agentOpts := []fantasy.AgentOption{
 		fantasy.WithTools(adaptedTools...),
 		fantasy.WithStopConditions(fantasy.StepCountIs(al.maxIterations)),
@@ -660,7 +638,6 @@ func (al *AgentLoop) runAgentLoop(ctx context.Context, opts processOptions) (str
 	if systemPrompt != "" {
 		agentOpts = append(agentOpts, fantasy.WithSystemPrompt(systemPrompt))
 	}
-	// Attach SecureBusToolRuntime when ITR is enabled (non-nil bus).
 	if al.secureBus != nil {
 		sbrt := SecureBusToolRuntime{
 			Bus:        al.secureBus,
@@ -676,55 +653,34 @@ func (al *AgentLoop) runAgentLoop(ctx context.Context, opts processOptions) (str
 			"tools_count":    len(adaptedTools),
 			"history_count":  len(historyMsgs),
 			"max_iterations": al.maxIterations,
-			"memory_enabled": al.memoryStore != nil,
+			"memory_enabled": true,
 		})
 
-	// 8. Call Fantasy agent.Generate()
-	result, err := agent.Generate(ctx, fantasy.AgentCall{
-		Prompt:   userPrompt,
-		Messages: fantasyHistory,
-	})
-	if err != nil {
-		logger.ErrorCF("agent", "Fantasy Generate failed",
-			map[string]interface{}{
-				"error": err.Error(),
-			})
-		return "", fmt.Errorf("agent Generate failed: %w", err)
+	return assembledContext{
+		systemPrompt:   systemPrompt,
+		userPrompt:     userPrompt,
+		fantasyHistory: fantasyHistory,
+		adaptedTools:   adaptedTools,
+		agent:          agent,
 	}
+}
 
-	// 9. Save all step messages to session and audit tool calls
-	stepCount := len(result.Steps)
-	for _, step := range result.Steps {
-		stepMsgs := picofantasy.StepToMessages(step)
-		for _, m := range stepMsgs {
-			al.sessions.AddFullMessage(opts.SessionKey, m)
-		}
-		al.auditStep(ctx, step, opts.SessionKey)
-	}
-
-	// 10. Extract final text
-	finalContent := result.Response.Content.Text()
-
-	// 11. Handle empty response
+// postProcess handles the common finalization after Generate or Stream:
+// extract final text, save session, summarize, observe, optionally send response.
+func (al *AgentLoop) postProcess(ctx context.Context, opts processOptions, finalContent string, stepCount int) string {
 	if finalContent == "" {
 		finalContent = opts.DefaultResponse
 	}
 
-	// 12. Save session
 	al.sessions.Save(opts.SessionKey)
 
-	// 13. Optional: summarization
 	if opts.EnableSummary {
-		al.maybeSummarize(opts.SessionKey, opts.Channel, opts.ChatID)
+		al.maybeSummarize(ctx, opts.SessionKey, opts.Channel, opts.ChatID)
 	}
 
-	// 13b. Trigger async observation if tail exceeds token threshold
-	if al.obsManager != nil {
-		tail := al.sessionsToMessagePairs(opts.SessionKey)
-		al.obsManager.MaybeObserveAsync(ctx, opts.SessionKey, tail)
-	}
+	tail := al.sessionsToMessagePairs(opts.SessionKey)
+	al.obsManager.MaybeObserveAsync(ctx, opts.SessionKey, tail)
 
-	// 14. Optional: send response via bus
 	if opts.SendResponse {
 		al.bus.PublishOutbound(bus.OutboundMessage{
 			Channel: opts.Channel,
@@ -733,7 +689,6 @@ func (al *AgentLoop) runAgentLoop(ctx context.Context, opts processOptions) (str
 		})
 	}
 
-	// 15. Log response
 	responsePreview := utils.Truncate(finalContent, 120)
 	logger.InfoCF("agent", fmt.Sprintf("Response: %s", responsePreview),
 		map[string]interface{}{
@@ -742,110 +697,50 @@ func (al *AgentLoop) runAgentLoop(ctx context.Context, opts processOptions) (str
 			"final_length": len(finalContent),
 		})
 
-	return finalContent, nil
+	return finalContent
 }
 
-// runAgentLoopStreaming uses Fantasy's agent.Stream() to stream token deltas
-// to the bus in real time. Structure mirrors runAgentLoop but uses AgentStreamCall
-// with OnTextDelta, OnStepFinish, and OnToolCall callbacks.
-func (al *AgentLoop) runAgentLoopStreaming(ctx context.Context, opts processOptions) (string, error) {
-	// 0. Record last channel
-	if opts.Channel != "" && opts.ChatID != "" {
-		if !constants.IsInternalChannel(opts.Channel) {
-			channelKey := fmt.Sprintf("%s:%s", opts.Channel, opts.ChatID)
-			if err := al.RecordLastChannel(channelKey); err != nil {
-				logger.WarnCF("agent", "Failed to record last channel: %v", map[string]interface{}{"error": err.Error()})
-			}
+// runAgentLoop is the core message processing logic.
+// It delegates to assembleContext for shared pre-processing, then branches on
+// opts.Streaming to either Generate (synchronous) or Stream (real-time deltas).
+func (al *AgentLoop) runAgentLoop(ctx context.Context, opts processOptions) (string, error) {
+	al.activeSessionKey.Store(opts.SessionKey)
+
+	ac := al.assembleContext(ctx, opts)
+
+	if opts.Streaming {
+		return al.runStreaming(ctx, opts, ac)
+	}
+
+	result, err := ac.agent.Generate(ctx, fantasy.AgentCall{
+		Prompt:   ac.userPrompt,
+		Messages: ac.fantasyHistory,
+	})
+	if err != nil {
+		logger.ErrorCF("agent", "Fantasy Generate failed",
+			map[string]interface{}{"error": err.Error()})
+		return "", fmt.Errorf("agent Generate failed: %w", err)
+	}
+
+	for _, step := range result.Steps {
+		stepMsgs := picofantasy.StepToMessages(step)
+		for _, m := range stepMsgs {
+			al.sessions.AddFullMessage(opts.SessionKey, m)
 		}
+		al.auditStep(ctx, step, opts.SessionKey)
 	}
 
-	// 1. Update tool contexts
-	al.updateToolContexts(opts.Channel, opts.ChatID)
+	finalContent := result.Response.Content.Text()
+	return al.postProcess(ctx, opts, finalContent, len(result.Steps)), nil
+}
 
-	// 2. Load observation block for system prompt injection
-	if al.obsManager != nil {
-		block := al.obsManager.LoadBlock(ctx, opts.SessionKey)
-		al.contextBuilder.SetObservationBlock(block)
-	}
-
-	// 2b. Load knowledge block from completed Focus sessions
-	if al.memDelegate != nil {
-		kb := tools.LoadKnowledgeBlock(ctx, al.memDelegate, opts.SessionKey)
-		al.contextBuilder.SetKnowledgeBlock(kb)
-	}
-
-	// 3. Build messages with DAG compression
-	var history []messages.Message
-	var summary string
-	if !opts.NoHistory {
-		history = al.sessions.GetHistory(opts.SessionKey)
-		summary = al.sessions.GetSummary(opts.SessionKey)
-	}
-
-	// 3a. DAG compression
-	history = al.applyDAGCompression(history)
-
-	builtMsgs := al.contextBuilder.BuildMessages(history, summary, opts.UserMessage, nil, opts.Channel, opts.ChatID)
-
-	// 4. Save user message
-	al.sessions.AddMessage(opts.SessionKey, "user", opts.UserMessage)
-
-	// 5. Split into system/history/user
-	systemPrompt := ""
-	var historyMsgs []messages.Message
-	userPrompt := opts.UserMessage
-
-	if len(builtMsgs) > 0 && builtMsgs[0].Role == "system" {
-		systemPrompt = builtMsgs[0].Content
-		if len(builtMsgs) > 2 {
-			historyMsgs = builtMsgs[1 : len(builtMsgs)-1]
-		}
-	}
-
-	// 5. Convert history
-	fantasyHistory := picofantasy.MessagesToFantasy(historyMsgs)
-
-	// 6. Build adapted tools (with optional offloading)
-	streamAdaptCfg := picofantasy.AdaptedToolsConfig{
-		MemStore:   al.memoryStore,
-		AgentID:    "picoclaw",
-		SessionKey: opts.SessionKey,
-	}
-	adaptedTools := picofantasy.BuildAdaptedTools(al.tools, al.bus, opts.Channel, opts.ChatID, streamAdaptCfg)
-
-	// 7. Create Fantasy agent
-	agentOpts := []fantasy.AgentOption{
-		fantasy.WithTools(adaptedTools...),
-		fantasy.WithStopConditions(fantasy.StepCountIs(al.maxIterations)),
-	}
-	if systemPrompt != "" {
-		agentOpts = append(agentOpts, fantasy.WithSystemPrompt(systemPrompt))
-	}
-	// Attach SecureBusToolRuntime when ITR is enabled (non-nil bus).
-	if al.secureBus != nil {
-		sbrt := SecureBusToolRuntime{
-			Bus:        al.secureBus,
-			SessionKey: opts.SessionKey,
-		}
-		agentOpts = append(agentOpts, fantasy.WithToolRuntime(sbrt))
-	}
-	fantasyAgent := fantasy.NewAgent(al.languageModel, agentOpts...)
-
-	logger.DebugCF("agent", "Fantasy streaming agent created",
-		map[string]interface{}{
-			"model":          al.model,
-			"tools_count":    len(adaptedTools),
-			"history_count":  len(historyMsgs),
-			"max_iterations": al.maxIterations,
-			"memory_enabled": al.memoryStore != nil,
-		})
-
-	// 8. Build streaming call with callbacks
+// runStreaming uses Fantasy's agent.Stream() to stream token deltas to the bus
+// in real time, using the pre-assembled context from assembleContext.
+func (al *AgentLoop) runStreaming(ctx context.Context, opts processOptions, ac assembledContext) (string, error) {
 	streamCall := fantasy.AgentStreamCall{
-		Prompt:   userPrompt,
-		Messages: fantasyHistory,
+		Prompt:   ac.userPrompt,
+		Messages: ac.fantasyHistory,
 
-		// Stream text deltas to bus in real time
 		OnTextDelta: func(id, text string) error {
 			if opts.Channel != "" && opts.ChatID != "" {
 				al.bus.PublishOutbound(bus.OutboundMessage{
@@ -867,7 +762,6 @@ func (al *AgentLoop) runAgentLoopStreaming(ctx context.Context, opts processOpti
 			return nil
 		},
 
-		// Log tool calls as they happen
 		OnToolCall: func(tc fantasy.ToolCallContent) error {
 			logger.DebugCF("agent", "Streaming tool call",
 				map[string]interface{}{
@@ -878,56 +772,21 @@ func (al *AgentLoop) runAgentLoopStreaming(ctx context.Context, opts processOpti
 		},
 	}
 
-	// 9. Call Fantasy agent.Stream()
-	result, err := fantasyAgent.Stream(ctx, streamCall)
+	result, err := ac.agent.Stream(ctx, streamCall)
 	if err != nil {
 		logger.ErrorCF("agent", "Fantasy Stream failed",
 			map[string]interface{}{"error": err.Error()})
 		return "", fmt.Errorf("agent Stream failed: %w", err)
 	}
 
-	// 10. Extract final text
 	finalContent := result.Response.Content.Text()
-	if finalContent == "" {
-		finalContent = opts.DefaultResponse
-	}
-
-	// 11. Save session
-	al.sessions.Save(opts.SessionKey)
-
-	// 12. Summarization
-	if opts.EnableSummary {
-		al.maybeSummarize(opts.SessionKey, opts.Channel, opts.ChatID)
-	}
-
-	// 12b. Trigger async observation if tail exceeds token threshold
-	if al.obsManager != nil {
-		tail := al.sessionsToMessagePairs(opts.SessionKey)
-		al.obsManager.MaybeObserveAsync(ctx, opts.SessionKey, tail)
-	}
-
-	// 13. Log response
-	stepCount := len(result.Steps)
-	responsePreview := utils.Truncate(finalContent, 120)
-	logger.InfoCF("agent", fmt.Sprintf("Streaming response: %s", responsePreview),
-		map[string]interface{}{
-			"session_key":  opts.SessionKey,
-			"steps":        stepCount,
-			"final_length": len(finalContent),
-			"total_tokens": result.TotalUsage.TotalTokens,
-		})
-
-	return finalContent, nil
+	return al.postProcess(ctx, opts, finalContent, len(result.Steps)), nil
 }
 
 // runLLMIteration — DELETED. Replaced by Fantasy's internal agent loop.
 
 // auditStep logs tool calls from a Fantasy step result to the audit log.
 func (al *AgentLoop) auditStep(ctx context.Context, step fantasy.StepResult, sessionKey string) {
-	if al.memDelegate == nil {
-		return
-	}
-
 	toolCalls := step.Content.ToolCalls()
 	if len(toolCalls) == 0 {
 		return
@@ -974,13 +833,12 @@ func (al *AgentLoop) updateToolContexts(channel, chatID string) {
 // maybeSummarize triggers summarization if the session history exceeds thresholds.
 // At the critical threshold (≥95% of context window) it synchronously force-compresses
 // the history before the normal async summarization path runs.
-func (al *AgentLoop) maybeSummarize(sessionKey, channel, chatID string) {
+func (al *AgentLoop) maybeSummarize(ctx context.Context, sessionKey, channel, chatID string) {
 	newHistory := al.sessions.GetHistory(sessionKey)
 	tokenEstimate := al.estimateTokens(newHistory)
 	threshold := al.contextWindow * 75 / 100
 	criticalThreshold := al.contextWindow * 95 / 100
 
-	// Emergency path: drop oldest messages immediately when near context limit.
 	if tokenEstimate > criticalThreshold {
 		al.forceCompression(sessionKey)
 		return
@@ -990,7 +848,6 @@ func (al *AgentLoop) maybeSummarize(sessionKey, channel, chatID string) {
 		if _, loading := al.summarizing.LoadOrStore(sessionKey, true); !loading {
 			go func() {
 				defer al.summarizing.Delete(sessionKey)
-				// Notify user about optimization if not an internal channel
 				if !constants.IsInternalChannel(channel) {
 					al.bus.PublishOutbound(bus.OutboundMessage{
 						Channel: channel,
@@ -998,7 +855,7 @@ func (al *AgentLoop) maybeSummarize(sessionKey, channel, chatID string) {
 						Content: "⚠️ Memory threshold reached. Optimizing conversation history...",
 					})
 				}
-				al.summarizeSession(sessionKey)
+				al.summarizeSession(ctx, sessionKey)
 			}()
 		}
 	}
@@ -1119,8 +976,8 @@ func formatMessagesForLog(msgs []messages.Message) string {
 }
 
 // summarizeSession summarizes the conversation history for a session.
-func (al *AgentLoop) summarizeSession(sessionKey string) {
-	ctx, cancel := context.WithTimeout(context.Background(), 120*time.Second)
+func (al *AgentLoop) summarizeSession(parentCtx context.Context, sessionKey string) {
+	ctx, cancel := context.WithTimeout(parentCtx, 120*time.Second)
 	defer cancel()
 
 	history := al.sessions.GetHistory(sessionKey)
diff --git a/pkg/agent/loop_test.go b/pkg/agent/loop_test.go
index 7e80a5842..c22a12338 100644
--- a/pkg/agent/loop_test.go
+++ b/pkg/agent/loop_test.go
@@ -4,7 +4,6 @@ import (
 	"context"
 	"fmt"
 	"os"
-	"path/filepath"
 	"testing"
 	"time"
 
@@ -14,6 +13,16 @@ import (
 	"github.com/sipeed/picoclaw/pkg/tools"
 )
 
+// mustNewAgentLoop wraps NewAgentLoop and fails the test on error.
+func mustNewAgentLoop(t *testing.T, cfg *config.Config, msgBus *bus.MessageBus, model fantasy.LanguageModel) *AgentLoop {
+	t.Helper()
+	al, err := NewAgentLoop(context.Background(), cfg, msgBus, model)
+	if err != nil {
+		t.Fatalf("NewAgentLoop: %v", err)
+	}
+	return al
+}
+
 // mockLanguageModel is a simple mock fantasy.LanguageModel for testing
 type mockLanguageModel struct {
 	response string
@@ -76,11 +85,11 @@ func TestRecordLastChannel(t *testing.T) {
 	// Create agent loop
 	msgBus := bus.NewMessageBus()
 	model := newMockLanguageModel("")
-	al := NewAgentLoop(cfg, msgBus, model)
+	al := mustNewAgentLoop(t, cfg, msgBus, model)
 
 	// Test RecordLastChannel
 	testChannel := "test-channel"
-	err = al.RecordLastChannel(testChannel)
+	err = al.RecordLastChannel(context.Background(), testChannel)
 	if err != nil {
 		t.Fatalf("RecordLastChannel failed: %v", err)
 	}
@@ -92,7 +101,7 @@ func TestRecordLastChannel(t *testing.T) {
 	}
 
 	// Verify persistence by creating a new agent loop
-	al2 := NewAgentLoop(cfg, msgBus, model)
+	al2 := mustNewAgentLoop(t, cfg, msgBus, model)
 	if al2.state.GetLastChannel() != testChannel {
 		t.Errorf("Expected persistent channel '%s', got '%s'", testChannel, al2.state.GetLastChannel())
 	}
@@ -121,11 +130,11 @@ func TestRecordLastChatID(t *testing.T) {
 	// Create agent loop
 	msgBus := bus.NewMessageBus()
 	model := newMockLanguageModel("")
-	al := NewAgentLoop(cfg, msgBus, model)
+	al := mustNewAgentLoop(t, cfg, msgBus, model)
 
 	// Test RecordLastChatID
 	testChatID := "test-chat-id-123"
-	err = al.RecordLastChatID(testChatID)
+	err = al.RecordLastChatID(context.Background(), testChatID)
 	if err != nil {
 		t.Fatalf("RecordLastChatID failed: %v", err)
 	}
@@ -137,7 +146,7 @@ func TestRecordLastChatID(t *testing.T) {
 	}
 
 	// Verify persistence by creating a new agent loop
-	al2 := NewAgentLoop(cfg, msgBus, model)
+	al2 := mustNewAgentLoop(t, cfg, msgBus, model)
 	if al2.state.GetLastChatID() != testChatID {
 		t.Errorf("Expected persistent chat ID '%s', got '%s'", testChatID, al2.state.GetLastChatID())
 	}
@@ -166,18 +175,12 @@ func TestNewAgentLoop_StateInitialized(t *testing.T) {
 	// Create agent loop
 	msgBus := bus.NewMessageBus()
 	model := newMockLanguageModel("")
-	al := NewAgentLoop(cfg, msgBus, model)
+	al := mustNewAgentLoop(t, cfg, msgBus, model)
 
-	// Verify state manager is initialized
+	// Verify state manager is initialized (delegate-backed via always-on memory)
 	if al.state == nil {
 		t.Error("Expected state manager to be initialized")
 	}
-
-	// Verify state directory was created
-	stateDir := filepath.Join(tmpDir, "state")
-	if _, err := os.Stat(stateDir); os.IsNotExist(err) {
-		t.Error("Expected state directory to exist")
-	}
 }
 
 // TestToolRegistry_ToolRegistration verifies tools can be registered and retrieved
@@ -201,7 +204,7 @@ func TestToolRegistry_ToolRegistration(t *testing.T) {
 
 	msgBus := bus.NewMessageBus()
 	model := newMockLanguageModel("")
-	al := NewAgentLoop(cfg, msgBus, model)
+	al := mustNewAgentLoop(t, cfg, msgBus, model)
 
 	// Register a custom tool
 	customTool := &mockCustomTool{}
@@ -247,7 +250,7 @@ func TestToolContext_Updates(t *testing.T) {
 
 	msgBus := bus.NewMessageBus()
 	model := newMockLanguageModel("OK")
-	_ = NewAgentLoop(cfg, msgBus, model)
+	_ = mustNewAgentLoop(t, cfg, msgBus, model)
 
 	// Verify that ContextualTool interface is defined and can be implemented
 	// This test validates the interface contract exists
@@ -278,7 +281,7 @@ func TestToolRegistry_GetDefinitions(t *testing.T) {
 
 	msgBus := bus.NewMessageBus()
 	model := newMockLanguageModel("")
-	al := NewAgentLoop(cfg, msgBus, model)
+	al := mustNewAgentLoop(t, cfg, msgBus, model)
 
 	// Register a test tool and verify it shows up in startup info
 	testTool := &mockCustomTool{}
@@ -322,7 +325,7 @@ func TestAgentLoop_GetStartupInfo(t *testing.T) {
 
 	msgBus := bus.NewMessageBus()
 	model := newMockLanguageModel("")
-	al := NewAgentLoop(cfg, msgBus, model)
+	al := mustNewAgentLoop(t, cfg, msgBus, model)
 
 	info := al.GetStartupInfo()
 
@@ -369,7 +372,7 @@ func TestAgentLoop_Stop(t *testing.T) {
 
 	msgBus := bus.NewMessageBus()
 	model := newMockLanguageModel("")
-	al := NewAgentLoop(cfg, msgBus, model)
+	al := mustNewAgentLoop(t, cfg, msgBus, model)
 
 	// Note: running is only set to true when Run() is called
 	// We can't test that without starting the event loop
@@ -476,7 +479,7 @@ func TestToolResult_SilentToolDoesNotSendUserMessage(t *testing.T) {
 
 	msgBus := bus.NewMessageBus()
 	model := newMockLanguageModel("File operation complete")
-	al := NewAgentLoop(cfg, msgBus, model)
+	al := mustNewAgentLoop(t, cfg, msgBus, model)
 	helper := testHelper{al: al}
 
 	// ReadFileTool returns SilentResult, which should not send user message
@@ -518,7 +521,7 @@ func TestToolResult_UserFacingToolDoesSendMessage(t *testing.T) {
 
 	msgBus := bus.NewMessageBus()
 	model := newMockLanguageModel("Command output: hello world")
-	al := NewAgentLoop(cfg, msgBus, model)
+	al := mustNewAgentLoop(t, cfg, msgBus, model)
 	helper := testHelper{al: al}
 
 	// ExecTool returns UserResult, which should send user message
diff --git a/pkg/agent/toolloop.go b/pkg/agent/toolloop.go
new file mode 100644
index 000000000..9b9a58f1e
--- /dev/null
+++ b/pkg/agent/toolloop.go
@@ -0,0 +1,80 @@
+// PicoClaw - Ultra-lightweight personal AI agent
+// License: MIT
+//
+// Copyright (c) 2026 PicoClaw contributors
+
+package agent
+
+import (
+	"context"
+	"fmt"
+
+	fantasy "charm.land/fantasy"
+	picofantasy "github.com/sipeed/picoclaw/pkg/fantasy"
+	"github.com/sipeed/picoclaw/pkg/logger"
+	memstore "github.com/sipeed/picoclaw/pkg/memory/store"
+	"github.com/sipeed/picoclaw/pkg/tools"
+)
+
+// RunToolLoop executes an agent tool loop using Fantasy with the canonical
+// PicoToolAdapter (schema unwrapping + offloading). This is the single
+// implementation used by both main agent and subagents.
+func RunToolLoop(ctx context.Context, config tools.ToolLoopConfig, systemPrompt, userPrompt, channel, chatID string) (*tools.ToolLoopResult, error) {
+	return runToolLoopWithMem(ctx, config, systemPrompt, userPrompt, channel, chatID, nil)
+}
+
+// MakeRunLoopFunc returns a RunLoopFunc that uses the given MemoryStore for
+// tool result offloading. This is wired into SubagentManager so subagent tool
+// results get offloaded to archival memory.
+func MakeRunLoopFunc(ms *memstore.MemoryStore) tools.RunLoopFunc {
+	return func(ctx context.Context, config tools.ToolLoopConfig, systemPrompt, userPrompt, channel, chatID string) (*tools.ToolLoopResult, error) {
+		return runToolLoopWithMem(ctx, config, systemPrompt, userPrompt, channel, chatID, ms)
+	}
+}
+
+func runToolLoopWithMem(ctx context.Context, config tools.ToolLoopConfig, systemPrompt, userPrompt, channel, chatID string, ms *memstore.MemoryStore) (*tools.ToolLoopResult, error) {
+	adaptCfg := picofantasy.AdaptedToolsConfig{
+		MemStore:   ms,
+		AgentID:    "picoclaw",
+		SessionKey: "",
+	}
+	adaptedTools := picofantasy.BuildAdaptedTools(config.Tools, config.Bus, channel, chatID, adaptCfg)
+
+	agentOpts := []fantasy.AgentOption{
+		fantasy.WithTools(adaptedTools...),
+		fantasy.WithStopConditions(fantasy.StepCountIs(config.MaxIterations)),
+	}
+	if systemPrompt != "" {
+		agentOpts = append(agentOpts, fantasy.WithSystemPrompt(systemPrompt))
+	}
+	agent := fantasy.NewAgent(config.Model, agentOpts...)
+
+	logger.DebugCF("toolloop", "Agent created",
+		map[string]any{
+			"tools_count":    len(adaptedTools),
+			"max_iterations": config.MaxIterations,
+		})
+
+	result, err := agent.Generate(ctx, fantasy.AgentCall{
+		Prompt: userPrompt,
+	})
+	if err != nil {
+		logger.ErrorCF("toolloop", "Fantasy agent.Generate failed",
+			map[string]any{"error": err.Error()})
+		return nil, fmt.Errorf("agent Generate failed: %w", err)
+	}
+
+	finalContent := result.Response.Content.Text()
+	stepCount := len(result.Steps)
+
+	logger.InfoCF("toolloop", "Tool loop completed",
+		map[string]any{
+			"steps":         stepCount,
+			"content_chars": len(finalContent),
+		})
+
+	return &tools.ToolLoopResult{
+		Content:    finalContent,
+		Iterations: stepCount,
+	}, nil
+}